Negative view for India’s broadcasters

The outlook for the India TV broadcasting sector is negative in 2012 due to a lull in the growth of advertising spending, according to Fitch Ratings. The advertising spend slowdown coincides with slower economic growth and subsequent cost reduction initiatives by corporates, says the agency. TV broadcasters generate between 70% and 90% of their revenues from advertising, and so are likely to be hit hard by the changed economic climate. However, 'those which have diversified their revenue base towards subscription are expected to perform better than those with a higher exposure to advertising revenue', says Fitch. Across the board, the agency suggests the Indian media industry will grow at a rate of 8%-12% in 2012. However, broadcasting industry margins are expected to fall to around 24%-28% - more than the 18-22% falls predicted for the print media sector. Lower profitability will 'lead to the deterioration of the credit metrics of the companies in these two sectors', warns Fitch in its report, 2012 Outlook: Indian Media & Entertainment - Reduced Advertising Spending Threatens Margins. The business profile of India's multi system operators (MSOs) will be improved over the medium to long term through the introduction of mandatory cable TV digitisation, the agency adds. Radio phase III auctions are also thought to be a positive in the long term view of the industry. Worsened credit profiles of operators in the short- to medium-term are expected, however, as successful bidders will have to pay non-refundable one-time entry fees. Fitch-rated Indian media and entertainment companies include MSO Hathway Cable & Datacom Limited ('Fitch A-(ind)'/Stable), Rajasthan Patrika Private Limited ('Fitch BBB+(ind)'/Stable) and Stargaze Entertainment Private Limited ('Fitch BB-(ind)'/Negative).